in the gold loan, microfinance area, the possibility of collusion to defraud is very high. There were even murders of the collection agent by a group of women where they borrowed and instead of paying back to the agent every week, they colluded and murdered her. Here in the gold loan business, substitution, theft, robbery at every transit stage now mirrors early ATM thefts(insider jobs) when ATMs were being pushed.
As it is, the RBI has warned on the lending practice in this area. I personally feel, this is a high risk investment area purely from a finance POV; high interest rates, higher NPAs. Also culturally, if someone is desperate to pledge their gold, they’re most likely over their head in other loans or issues somewhere else.
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